Tobi Aminu

The Federal Inland Revenue Service (FIRS), on 30 April 2019, notified the public that it has introduced new measures to simplify and ease tax audit experience for all taxpayers. The new measures are intended to: Reduce tax audit cycle to 63 days Eliminate multiple tax audits by various tax authorities Facilitate a single tax audit exercise window for a taxpayer that operates in more than one tax jurisdiction within Nigeria In order to ensure that the above objectives are achieved, FIRS, various States Internal Revenue Service (SIRS) and Joint Tax Board (JTB) signed a Memorandum of Understanding (MoU). Understandably, the achievement of the 63-day cycle for completion of a tax audit exercise will depend largely on human factors such as; ease of provision of relevant documents by taxpayers, level of efficiency of the tax authorities during the review process and availability of the parties for reconciliation meetings to resolve the tax audit issues identified. Thus, it may be challenging or difficult to conclude some tax audit exercises within the recommended timeline above. Nonetheless, the recommended timeline sets a benchmark that tax authorities and taxpayers can work towards to ensure the speedy conclusion of tax audits. To ensure the objectives of the new measures are achieved, tax authorities may also consider simplifying tax audit selection procedures and adopting a risk-based approach to tax audit exercises. Further, while there are no indications on the required steps to reduce the audit completion cycle, elimination of multiple tax audits would go a long way in reducing the time spent by taxpayers. With respect to elimination of multiple tax audits, the FIRS Notice requires a taxpayer that operates in more than one tax jurisdiction within Nigeria, to apply for a joint tax audit through JTB, or the Office of FIRS’ Executive Chairman, or the Office of the Chairman of the relevant SIRS where the taxpayer’s head office is domiciled. This initiative is a welcome development and a step in the right direction in addressing taxpayers’ clamour for elimination of multiple tax reviews and audits to ensure efficient use of resources of both the tax administrators and the taxpayers. It remains to be seen, how the MoU would play out. It would be recalled that FIRS signed MoU with SIRSs during the Voluntary Assets and Income Declaration Scheme (VAIDS). However, the aftermath of VAIDS was greeted by conflicting tax audits/reviews by SIRSs, which included years already covered under VAIDS, for which a taxpayer had already made a voluntary declaration. It is hoped that the MoU would be upheld to ensure that the above objectives are met.   Source: Deloitte

The Economic and Financial Crimes Commission (EFCC) has launched a probe into the activities of some staff of the Federal Inland Revenue Service (FIRS). Babatunde Fowler, FIRS chairman, confirmed the development to TheCable on Wednesday saying the probe borders on alleged cases of irregularities concerning duty tour allowance (DTA). “On the DTA (Duty Tour Allowance), it was claimed that some staff applied for and were granted, allowances to travel for official trips. Some are alleged not to have travelled for the number of days, for which they were slated. The EFCC is looking into that,” he said. “Sometimes, it is good to have a third party investigate matters like this instead of having a staff investigate another staff. An investigation by a third party is more objective. FIRS has since taken steps to remediate this. “The EFCC will soon complete its investigation. Anybody found guilty will be dealt with through our administrative process.” Fowler also dismissed claims that taxpayers’ money has gone missing. He explained that all taxes are paid directly into the account of federation account through the Central Bank of Nigeria. “The FIRS does not have access to taxpayers money. Its operations are funded by an appropriation of the national assembly through monthly remittances by the federation accounts allocation committee (FAAC),” he said. Fowler added that FIRS acknowledges the statutory rights and responsibilities of anti-corruption agencies and other government agencies such as the EFCC, the Independent Corrupt Practices and Other Related Offences Commission (ICPC), State Security Services, SSS to inquire into the operations of the Service. The FIRS chairman promised that FIRS would continue to give access to agencies with statutory rights adding that invitations of officials of the service by EFCC, the Police, SSS and ICPC to shed light financial transactions are not uncommon.   Source: The Cable

The Chairman of the Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler, has dismissed reports suggesting that money paid as taxes is missing from the agency’s coffers. Fowler made the clarification in an interview in his office in Abuja, yesterday. The clarification came in the wake of media reports alleging that taxpayers’ money in the custody of the agency is missing. The FIRS chairman explained that taxes collected by the FIRS are not paid into the coffers of the agency, but directly into the Federation Account, electronically, through the Central Bank of Nigeria (CBN). The FIRS, he further explained, does not have access to taxpayers’ money, adding that its operations are funded by appropriation of the National Assembly through monthly remittances by the Federation Accounts Allocation Committee (FAAC). There were reports of alleged exploitation of the agency’s accounting system on Duty Tour Allowance (DTA) by some staff who collect claims that they are not due for. This alleged infraction is said to be under investigation by the Economic and Financial Crimes Commission (EFCC). However, some media outlets have reported that the probe was into missing taxpayers’ money. But Fowler explained that the issue at stake in this inquiry is related to operational/travel funds within the FIRS’ expenditure budget. “On the DTA (Duty Tour Allowance), it is claimed that some staff applied for and were granted allowances to travel on official trips. Some are alleged not to have travelled for the number of days for which they were slated. The EFCC is looking into that. Sometimes, it is good to have a third party investigate matters like this instead of having a staff investigate another staff. Investigation by a third party is more objective. FIRS has since taken steps to remediate this. The EFCC will soon complete its investigation. Anybody found guilty will be dealt with through our administrative process,” said the FIRS boss. Fowler also stated that the agency has a relationship with the EFCC through which it combats tax evasion. “We have a relationship with the Economic and Financial Crimes Commission (EFCC). We have a partnership through which we combat evasion of taxes. People don’t want to get into trouble with EFCC. So, they pay on time,” he explained. Fowler added that FIRS acknowledged the statutory rights and responsibilities of anti-corruption agencies and other government agencies such as the EFCC, the Independent Corrupt Practices and Other Related Offences Commission (ICPC), and the Department of State Services (DSS) to inquire into the operations of the agency. He promised that the FIRS will continue to give access to agencies with statutory rights and all those who seek information on its operations. He added that invitations of FIRS officials by the EFCC, Police, DSS and ICPC to shed light on financial transactions and operations of the agency are common and are continuous. Fowler noted that the FIRS is a public trust operated on behalf of Nigerians and affirmed that no officer of the Service is at large. The FIRS boss thanked all stakeholders, including the media, for their interest in the operations of the agency. However, he enjoined the media to always go the extra mile to ascertain the truth, particularly on sensitive financial issues where taxpayers and public trust are at stake. He re-assured the general public of FIRS’ commitment to public accountability and transparency in the sacred mandate of tax collection.   Source: This Days

About 55 life and non-life underwriting companies in the country have paid N36.5 billion as tax to the government through the Federal Inland Revenue Service (FIRS) in the last five years.The Guardian reliably gathered that between 2013 and 2017 financial years, these underwriters generated N100.4 billion as Profit Before Tax (PBT) and were left with Profit After Tax (PAT) of N63.9 billion, having paid N36.5 billion as tax to the government. The tax paid translates to about 35 per cent of the profit made within this period.  A data sourced from the Nigerian Insurers Association (NIA) showed that insurance companies made N9.8 billion as PBT, which was reduced to N4.9 billion after tax, having paid N4.8 billion as tax in 2013 financial year, while the industry recorded N6.3 billion PBT in 2014, which went into a negative of N691 million, after the operators paid about N7 billion as tax. In 2015, insurers made N11.3 billion profit, but the profit reduced to N6.1 billion, after paying N5.2 billion tax in that financial year. In 2016, the companies paid N11 billion as taxes from PBT of N29.4 billion declared and were left with PAT of N18.3 billion. Similarly, the insurers made a profit before tax of N43.8 billion in 2017 financial year and paid N8.3 billion tax to the government, leaving a profit after tax of N35.5 billion. Although, tax paid to government by insurance companies in 2018 financial year remains sketchy, as they are just releasing their financial accounts, there are indications that the tax could rise above N10 billion, given government’s plans to generate more revenue locally to finance the 2019 national budget Apart from paying tax on management expenses, short term lending, among others, insurers were also mandated to pay tax on claims, which is the core business of underwriting, meaning that the higher the claims paid by an underwriter, the higher the tax to be paid on such claims. The federal, state and local governments had embarked on aggressive revenue hunt, picking on corporate bodies like insurance companies, as a major part of the tax drive. Enforcement of these taxes reached an alarming rate last year with some insurance companies shut down by the Federal Inland Revenue Services (FIRS), until they were made to clear off their outstanding taxes. While the situation has a negative implication on the books of some struggling insurers, some had their little profit cut short by these taxes, while the big underwriters were not exempted from the impact of these taxes. NIA, under the leadership of its past Chairman, Eddie Efekoha, had complained that insurance industry is being subjected to  multiple taxation that is gradually eroding the profits of insurance companies, thereby, affecting their ability to give good returns on investment to shareholders as well as stakeholders. Efekoha, however, believes the permanent solution lies in amending the tax code, which takes some times to be amended, as it has to go through legislative processes at the National Assembly. “Giving returns on investment to shareholders and stakeholders has a lot to do with how much you make as profit, but in a scenario like ours, where we are subjected to multiple taxation, it becomes difficult to pay dividend to shareholders. “The more tax we pay, the more the returns to our stakeholders diminish. If you are to pay tax on claims and on management expenses, what this means is that you have little or nothing left to pay dividend to shareholders,” he said.  However, there was an ongoing discussion between NIA and FIRS to try to address this challenge. Last year, the General Manager, Retail Life, AIICO Insurance Plc, Sola Ajayi, said the tax code in Nigeria is too hard on both life and non-life insurance companies, as they were not allowed to take advantage of deferred tax, especially, for life business. “We cannot take advantage of those taxed assets because of Section 33 and Section 16 of the tax code. Section 33 is saying, we must pay minimum tax, while Section 16 is saying, even when you have a tax exempt income, you must pay something. “So, you cannot exempt paying tax on the life business where some are even incurring losses and you cannot fully take advantage of all your reliefs,” he said.  For non-life business, he said, the tax code does not recognise the whole claims paid as expense, noting that, no matter the claims you paid, you can only relief 25 per cent of it. According to him, “if you pay claims of any amount, the law does not allow claims as expenses, it only allow 25 per cent of it. So, why are we in operation? Is it not to pay claims?”   Source: Guardian

In 2017, the World Economic Forum (WEF) ranked Nigeria 125 out of 137 countries in its Global Competitiveness Report. The WEF survey found that Nigeria’s potential for structural change was impeded by inadequate investment in infrastructure, technology, higher education and innovation. Nigeria has long depended on oil as its economic mainstay with paltry attempts at diversification over the years. But a recent Bloomberg report finds that this one-source revenue base is unsustainable. Moreover, Nigeria is yet to regain its economic bearings following the 2014 crash in global oil prices. Experts find a viable alternative in the non-oil sector and available statistics from the Federal Inland Revenue Service (FIRS) justify this. At a tax-related interactive session with the Manufacturers Association of Nigeria (MAN) held in February, FIRS Chairman Babatunde Fowler disclosed that the non-oil sector outpaced the oil sector with a significant 54% contribution to the N5.32 trillion revenue generated in 2018. “Moving the government’s revenue away from oil dominated foreign earnings to more predictable sources have the potential to accelerate the country’s economic growth,” he said. But making the switch is not as easy as it sounds, thanks to Nigeria’s abysmal tax compliance levels. Fowler reinforced this when he argued that most businesses in the country charge customers Value Added Tax (VAT) for products supplied or services rendered but do not remit same to the government as statutorily required. As such, government lacks the incentive to deliver on capital projects that will fast-track the economic growth collectively envisaged. A Legacy of Tax Evasion In 2014, then Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, disclosed that 65% of companies in Nigeria had declined to forward their tax returns and a whopping 75% were not in the FIRS tax net. During the FIRS Stakeholders Engagement Forum organised in Lagos at the time, she maintained that the much vaunted case for economic diversification would gain little traction without a steady pipeline of alternative income sources such as taxation: “We have engaged in a process of increasing our non-oil taxes. Every Nigerian wants to see us depend less on oil, and more on the other resources of the economy.” But by 2015, the situation was no different. Chairman of the Edo State Internal Revenue Service (EIRS) argued that 80% of taxable Nigerians had no Tax Identification Number (TIN) and were therefore out of the tax net. At the Annual Tax Conference (ATC) organised by the Chartered Institute of Taxation (CITN) in Abuja at the time, he reportedly said this state of affairs was denying Nigeria lots of revenue that could ordinarily be invested in economic development. “When you calculate the tax income revenues Nigeria ought to have made and deduct it from the amount realised, we will all understand Nigeria is missing much,” he said. Year 2017 saw only 214 people in populous Nigeria paying taxes above N20 million. During a parley focused on economic growth jointly organised by the Nigerian Stock Exchange (NSE) and Bloomberg, then Minister of Finance Kemi Adeosun emphasised that Nigeria’s infrastructural deficit could only be addressed through a national culture of consistent tax payment: “We have just 40 million active tax payers out of an estimated 69.9 million…and of that 40 million, majority are PAYE, those who have their taxes deducted at source.” She disclosed the government’s plans to recruit 7,500 community tax officers tasked with educating the citizenry about the significance of tax compliance. If statistics from 2018 are anything to go by, Ms Adeosun’s community engagement did little more than skim the surface. FIRS disclosed that over 6,772 billionaires do not pay tax. This category of individuals have between N1billion and N5 billion in their accounts, but no Tax Identification Number (TIN) with which they can file the statutory percentage of tax returns on their income.   Source: Vanguard

10 ways taxes come to your rescue that you probably take for granted: Shelter If you were raised or currently reside in public housing, you may have reason to thank the taxes you or others have generated for the relative freedom you enjoy from exorbitant rent. After all, you have no reason to contend with agency, caution or other fees that your peers understand as the price they must pay for a roof over their heads. But don’t be surprised if the government makes demands for a fraction of your income to make the same facility available to others in the short run. The National Assembly has just passed the National Housing Fund (NHF) Bill 2018 which seeks to impose a compulsory 2.5% deduction on your monthly income to secure funding for additional housing projects in the country. Healthcare Oftentimes, private hospitals lack the specialised skills or equipment to treat the ailments that strike when you least expect. In such cases, they refer patients to general hospitals across the federation for more specialised care. If you or yours have had occasion to receive healthcare at any public hospital to cut cost or for referral purposes, you should be a tax ambassador because some of those hospitals were built with revenue generated from taxes. Think what would have happened to you if none were just around the corner when it mattered. Mass transit At federal, state or local government levels, you may have been lucky to catch a bus that only cost a fraction of what you usually expect from commercial transportation during your commute to work or business. Your child probably had cheery news to share about how a big neighbourhood bus took her to school for free. It is called a mass transit system provided by the government, and don’t be surprised if it was funded with proceeds from taxes paid by you or others. Free Education Taxes may have come to the rescue if you are the product of a public school or federal/state university. Remember how fulfilling it was to pay as little as N25, 000 as your tertiary school fee when the parents of your counterparts in private universities literally gave an arm and a leg to meet up with tuition? The government is sometimes able to achieve a measure of subsidised education because several upstanding citizens exercise their civic duty to pay taxes. It wouldn’t hurt to join them so others can have the same story to tell. Education is a basic right, after all. Brand Nigeria If you are a business person dealing in locally-made products with money in your pocket by month end, you probably have taxes to thank. Government often imposes high taxes on foreign goods to encourage patronage of local products by the citizenry. This might sometimes leave you smiling to the bank when it matters. Good Roads Roads riddled with potholes leave us frantic and furious because they do not only damage our vehicles but are often responsible for the auto accidents that claim innocent lives on a daily basis. This explains why good roads should not be taken for granted. They are products of the taxes/alternative revenue sources, and fall into the category of social amenities we expect when the government is financially buoyant. Job Creation In a country with unemployment figures pegged at 23.1%, it is a privilege to be part of the gainfully employed workforce. But what you may not know is that job creation sometimes depends a lot on taxation. Case in point, your organisation may have been priced out of the market without tax waivers or holidays granted by the government to encourage investments and business growth, depending on the industry that engages you. Thinking about this should encourage you to pay your taxes. Income Redistribution Tax helps ensure social justice in the sense that it is pegged at a particular percentage of income, not a specific fee. As such, it creates a level playing field for all because the higher your income, the higher the tax margin deducted and vice versa. Security Just about every one of us would prefer to live and work in secure neighbourhoods. In fact, we have reservations with the response time of the Nigerian police force because we want them available round the clock for crime-fighting and other purposes. But keep in mind that your tax is one source of remuneration for the cops. As such, prioritising tax payment is one sure way of keeping them motivated so they will be better placed to perform their statutory duties when situation calls for it.   Source: Vanguard